Nuvama Initiates Coverage on Aequs with 'Buy', Sets Target Price at Rs 444

Nuvama initiated coverage on aerospace player Aequs with a 'Buy' rating and a target price of Rs 444, implying a 91% upside from the stock's previous closing price of Rs 232.

Aequs deserves a valuation premium above pharma CDMOs, as unlike molecules, aircraft programmes never expire, Nuvama said in its latest report, calling the company a sector outperformer. The shares of the company surged 4% on Tuesday morning.

The brokerage noted that Aequs is India's only vertically-integrated aerospace SEZ, supplying machined aerostructures, landing gear and engine parts to OEMs such as Airbus and Boeing. It is also India's first genuine pure-play aerospace precision manufacturer—a moat built over time, not via capital alone, it added.

Also read: Aequs FY26 revenue rises 33% on aerospace, consumer business growth

A solid $889 million order book warrants a 42% sales and 84% EBITDA CAGR over FY26-29, according to Nuvama.

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“Fifteen years of patient capital allocation has produced something genuinely scarce in Indian manufacturing, a NADCAP-certified, vertically-integrated aerospace SEZ supplying machined aerostructures, landing gear and engine parts (from a single campus in Belagavi) to Airbus, Boeing, Safran, Collins and Bombardier. The $889 million contracted order book at 7.4x revenue coverage is not just a sales pipeline; these are solid purchase orders tied to OEM production schedules, each part underpinned by a complete FAI and an 18–36 month requalification wall. The 5,654 SKUs compound this moat with every new part added. The strategic pivot toward engine components—cemented by the INR19bn Tamil Nadu MoU for India's first integrated aero-engine ecosystem—puts Aequs on the map,” Nuvama said.

The brokerage noted that the consumer segment is loss-making today, and breakeven is a volume problem, not a margin one. While the plastics piece may take time to scale up, consumer electronics is likely to outpace growth in other segments, it further said, adding, “We approach margin assumptions with discipline: global peers Catcher Technology and Everwin Precision—precision enclosure suppliers to large consumer electronics companies—earn 8–15% operating margin, well below management's 20% EBITDA margin guidance. We are baking in a 15–18% EBITDA CAGR at steady state with a 75% 3Y sales CAGR.”

Also read: From Airbus parts to war drones | How Aequs is quietly building India's most ambitious defence manufacturing play

Nuvama values Aequs on a 30-year DCF at 16% WACC, deliberately matching the longevity of programmes being served—Boeing 737 has run for 58 years and A320 for 38. “A qualification won today is an annuity, not a contract. Risks are real, but bounded: i) raw material lead times of 52–75 weeks pressurise WC; ii) consumer ramp-up depends on anchor customer execution and iii) Boeing’s production recovery stays incomplete. We are buyers of all three risks at a valuation where the consumer contributes zero, and the OB trades at a fraction of its contracted forward revenue,” it added.

Aequs share price

Aequs shares listed at Rs 140 apiece on the NSE in December last year, marking a premium of nearly 13% over its IPO price of Rs 124 apiece. This came after the IPO, which comprised a fresh issue of Rs 670 crore and an offer for sale worth Rs 251.81 crore, saw overwhelming response from all categories of investors. The IPO was subscribed 122.93 times in the QIB category, 83.61 times among non-institutional investors and 81.03 times in the retail segment.

Also read: Aequs shares list at 13% premium over IPO price on bourses

After listing, the shares fell over 19% to hit a record low of Rs 113.3 apiece in March this year. The stock then sharply surged around 118% in around three months to hit a fresh record high of Rs 246.90 apiece last month. The stock has fallen around 2% since then, settling at around Rs 242 apiece on Tuesday.

The stock currently has a market capitalisation of around Rs 16,000 crore.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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